Mountain pushes pause on EB-5
WEST DOVER- Mount Snow's parent company Peak Resorts announced they have temporarily suspended their EB-5 fundraising campaign, citing pending legislative changes to the federal program.
In a notice submitted to the Securities and Exchange Commission last week, Peaks called the changes “potentially significant,” and said they anticipate resuming their fundraising before the end of 2018. “In consideration of these potentially significant changes, the company has suspended its recently announced Mount Snow development EB-5 program fundraising and is undertaking a review of the terms of such offering.”
The regulatory changes are expected to be implemented in August 2018, according to a notice posted by the federal Office of Management and Budget. Changes to the program that are already being implemented include a change in how the number of jobs created by a project is calculated. EB-5 projects must create 10 jobs per investor. Previously, jobs created by tenants in an EB-5-funded building were counted toward the total number of jobs created. Under a recent policy, those tenant jobs are no longer included in the calculation.
Although the final changes won't be known at least until August, a report this week by Bloomberg notes that lawmakers are seeking to increase the minimum investment required for EB-5 applicants. Currently, the minimum investment for investors in rural EB-5 projects like Mount Snow's, or those in federally designated targeted employment areas, is $500,000. The minimum investment for EB-5 investments in other areas is $1 million. Proponents of EB-5 reform have proposed increasing the minimum investment in rural areas and TEAs to $925,000 and to $1,025,000 in other areas.
A draft proposal released in March also called for a cut in the job creation requirement in rural areas and TEAs from 10 to nine, and an increase in other areas from 10 to 12. The draft would also increase scrutiny of investors' source of funds and more stringent record-keeping, background checks, and reporting requirements for regional centers.
In November 2017, Mount Snow announced they were approved to create their own Great Northern EB-5 Regional Center. At the time Peak Resorts CEO Tim Boyd called the regional center a central piece of the company's growth strategy.
In January 2018, Peak Resorts announced their first EB-5 offering from the new regional center. The $94 million phase 2 project at Mount Snow's Carinthia ski area included $38.5 million in traditional loan financing, along with $55.5 million raised through a private securities offering under the EB-5 program. Under the plan, Mount Snow sought a maximum of 111 EB-5 investors to invest a minimum of $500,000 each.
The project includes 102 luxury two- and three-bedroom condominium hotel units ranging in size from 1,130 to 2,155 square feet, in five buildings at the Carinthia base area.
Mount Snow's first EB-5-funded project included the West Lake snowmaking system and a new base lodge at Carinthia – phase 1 of their Carinthia project. The West Lake system was completed and online by the start of the 2017 ski season, and construction is nearing completion on Carinthia Base Lodge.
Mount Snow and Peak declined to comment for this article.